Too High A Fare: The Decline and Fall of the London Taxi Company
Manganese Bronze, better known as “The London Taxi Company” and maker of the iconic London’s black cab, has called in the administrators. By most accounts, the company has had problems for some time, with the market penetration and iconic status of its black cab proving both a blessing and a curse.
On the surface, it is something of a rapid fall from grace. The company had been profitable until 2007, with it signing a joint venture with Chinese car manufacturer Geely in that year. The profits, however, hid growing structural problems within the firm itself and with its flagship product. The basic design of the iconic black cab had not changed for many years, still featuring a ladder chassis for example. This, combined with customer service, pricing and after care grumbles from drivers, meant that the company’s position was arguably more fragile than it appeared on paper.
Mercedes’ entry into the London cab world with the Vito fired a warning shot across Manganese Bronze’s bows and proved to be one of the factors (alongside the new partnership with Geely) leading to the development of the TX4 in 2008, the first genuine shakeup of the black cab design for some time.
Unfortunately for the firm, the TX4 launch did not prove entirely successful. Representing the first vehicle produced in genuine partnership between Manganese Bronze and Geely, early models suffered a variety of problems. To a certain extent this was to be expected in a completely new line, but as reliability has always formed a key requirement of black cabs and a key part of their image, it was far from ideal. Issues with engine fires resulted in a partial recall in 2008, and a number of other minor niggles and problems dogged the vehicle early on.
Although these issues were all ultimately resolved, the company’s position was weakened financially and it has failed to report a profit since – in August, the firm confirmed that it already had a £3.9m hole in its accounts. Indeed four years on from its launch and initial problems a new, more serious, issue with the TX4 emerged and proved to be the straw that finally broke the camel’s back.
In February 2012 the company switched to a new Chinese supplier for the steering boxes on the TX4. Over the following months a number of them failed, with drivers reporting a loss of power and steering control. Investigations began and at the start of October, Manganese Bronze was forced to announce the urgent recall of 413 TX4s built since the supplier change, and to freeze sales on new vehicles.
Whether the issue related to manufacturing problems, or the substitution by the supplier of unapproved part, ultimately didn’t matter. With no income from sales, and the cost of the recall now on the books, the company was forced to seek additional funding. Its failure to successfully find a new financial backer, or to negotiate a new funding agreement with Geely, finally led to administration.
In many ways, the story of the company’s decline is a familiar one, especially to watchers of the automobile world. They effectively established a monopoly position in their chosen market (London taxis) and then began to stagnate. They failed to recognise the need to change for some time and their eventual attempt to innovate their way out of trouble only met with limited success. With the company’s finances now fragile, what was likely an effort to save money by switching suppliers on a key part of the TX4’s design ultimately proved to be a fatal mistake.
The question for Manganese Bronze now is “what next?” The firm employs 288 staff (170 of whom work at its assembly plant in Coventry) and both the Unite Union and Manganese Bronze Chief Executive John Russell have been vocal in the media on the need for a buyout or Government rescue of some kind.
It’s fair to say that, despite its structural problems, the likelihood of a buyer emerging for the firm is quite strong. The London taxi market may be more diverse than it used to be, and about to expand again with Nissan’s NV200 now beginning testing on the streets of the capital, but with its problems fixed the TX4 would still a force to be reckoned with – doubly so if a buyer was able to push through managerial and modernisation changes within Manganese Bronze itself.
The result of the administration announcement is most likely to be a full buyout by Geely themselves, who already own 20% of the company’s shares. Manganese Bronze are not Geely’s only investment in the western car world – they own Volvo as well – and with a good deal of the manufacturing work for the TX4 taking place in China already, a full buyout seems a natural step.
The likelihood, therefore, this this announcement will mark the shock demise of the “traditional” black cab is thus very low indeed. If Geely step up then it will largely be a case of “meet the new boss, same as the old boss” but (hopefully) with some shakeup of the structure and approach that caused Manganese Bronze to get into trouble in the first place – although this may not prove to be good news for the workers in Coventry as assembly would probably move entirely to China. If not, then the firm would prove a good purchase for a new player looking to buy their way into the London taxi world – a world that remains an attractive one for manufacturers, as the efforts of both Mercedes and Nissan in recent years prove.
Either way, the TX4 and its successors will almost certainly prove to be a feature of London’s streets for some time yet.